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Given that the Fiscal Year (FY) 2011 appropriations process was not completed before the adjournment of the 111th Congress in December 2010, the federal government has been operating under a Continuing Resolution (CR) that is funded at FY 2010 spending levels. The CR is set to expire on March 4, 2011 by which time Congress will have to either enact legislation to fund agencies until September 30 or another short-term CR in order to avoid a government shutdown.

To that end, House Republican leaders unveiled legislation on February 11 that would trim more than $58 billion from the current budget for the remainder of FY 2011 – an amount that is nearly $100 billion less than the President’s FY 2011 budget request.

The Rules Committee allowed for the legislation – H.R. 1 – to be brought to the House floor under an open rule that permitted amendments that were filed to be printed in the Congressional Record no later than February 15. Nearly 600 amendments were filed by Members from both parties by that deadline.

Throughout the four (4) days of debate on the House floor, more than 150 of those amendments were brought up and 67 of them were adopted. The adopted amendments varied widely in their content, and several examples include:

increased funding for police an firefighter grants; reduced funding for the National Endowment of the Arts (NEA);

elimination of funding for the F-35 alternative engine;

elimination of funding for the National Drug Intelligence Center; and a prohibition of the use of funds to implement the new healthcare law – the Patient Protection and Affordable Care Act.

Once amendment debate concluded the House moved to final passage of H.R. 1, which occurred by a vote of 235-189 in the early morning hours of February 19. Three Republicans broke ranks and did not support the measure, and all Democrats voted against final passage.

The bill now moves to the Senate for consideration. Many of the spending cuts included by the House have been met with strong resistance from the Democratic majority in the upper chamber. There is little time for the House and Senate to come to an agreement on FY 2011 spending. This increases the likelihood that another stop-gap CR will need to be enacted prior to the upcoming March 4 deadline. But even that process is likely to be contentious, as Speaker Boehner has indicated even a short-term CR would need to include spending cuts – a proposition the Senate may not support.

THE PRESIDENT’S FY 2012 BUDGET

Last week President Obama released his FY 2012 budget. Like the House Republican’s CR mentioned above, this document also lays out the short term spending/saving priorities for the country’s fiscal future. For its efforts in the discussion, the US Senate will need to find not only common ground between its Democratic and Republican Members but also among itself, the President and the House.

As has been widely reported, the President’s FY 2012 budget request provides for $3.8 TRILLION in spending, $1.6 TRILLION of which would have to be borrowed. For perspective, the first time the US Budget exceeded $1.6 TRILLION in spending was in 1997, less than 15 years ago. That means that the President's proposed FY 2012 budget deficit is larger than all but 15 years of our country’s 220-year history of annual spending.

It is also important to note that nearly $2.4 TRILLION of the budget is for mandatory programs – payments that must be made according to law. Mandatory programs include the familiar (Social Security, Medicare, Medicaid, Veterans’ Benefits, etc.), and other less obvious provisions (Agriculture payments, Universal Services Fund, etc.). The largest item, interest on the national debt, comes in at $475 billion. If the entire discretionary budget were eliminated, the departments of Defense, Justice, Education, Homeland Security, Interior and all others the US government would still run a deficit of $200 billion.

Both the President and House Republican leaders have stated that entitlement reform (cuts in mandatory spending and programs) must occur, but they also know that those receiving the payments – notably seniors – do not want them reduced. In the face of criticism that the FY 2012 budget does not address this problem, the President spoke at his press conference on February 15 of the need to “stabilize” the economy in the short term before entitlements could be reformed. He stated he thought entitlement reform could be addressed in a bipartisan way in the future.

According to Congressional Quarterly, when Office of Management and Budget (OMB) Director Jacob Lew was asked whether the Administration’s hope of the parties working together was just “wishful thinking” given that both sides were entrenched in their views, Lew said “I think that it’s fair to say that every side begins with its deeply-held views . . . I think it’s also true that you, looking ahead, have a hard time predicting where the moments of coming together are.” This statement could certainly be indicative of the tough discussion and battles ahead negotiating spending reform [and identifying new potential sources of revenue].

NEXT STEPS

Both the House and Senate are out of session this week for the Presidents’ Day district work period, but the week of February 28 will bring decisions on FY 2011 spending – likely in the form of another short-term CR given the upcoming March 4 deadline. We continue to follow news from Capitol Hill closely and will provide you with updates as new developments occur.